Pando

As Uber struggles, DiDi quietly takes up office space and poaches talent in Silicon Valley

By Sarah Lacy , written on March 13, 2017

From The Travis Shrugged Desk

We’re already a few weeks into the “urgent” Uber investigation and haven't yet seen a single consequence to Travis Kalanick, his “A-Team” or the people directly responsible for the atrocious treatment of Susan Fowler at the company. But what we are seeing is a steady stream of new critics willing to speak out.

Last weekend at South by Southwest, investor Chris Sacca said he wasn’t surprised about the Susan Fowler situation... Which is strange because he was one of the few investors to publicly defend Travis Kalanick after Emil Michael threatened to go after my family, and wrote this breathless love letter to Kalanick a good six months after we wrote that the company had a culture of systemic sexism.

Meantime, Vanity Fair’s Nick Bilton told CheddarTV that he doesn’t even think Uber will be around in ten years. Quite a reversal from Vanity Fair’s New Establishment List which rated Travis Kalanick number seven. The list was put together by a committee that included the same Nick Bilton. That list described Uber’s sky high burn rate as a “rare glimpse of mortality.” Somehow since that moment, the “rare glimpse” has become a near-certainty.

Sacca’s 2015 love letter was a warning against Google not to try to compete with Travis. Fast forward to today and a damning lawsuit alleging Uber’s acquired Otto stole secrets from Google. That could end Uber’s self driving ambitions before they start. At a minimum, it will weigh on any intended IPO or future fundraising until the case is settled. Meantime, Bilton focuses less on the company’s toxicity as his reason to doubt it will exist, and more that it will compete with Amazon one day. (That’s at least somewhat consistent with the New Establishment list ranking Jeff Bezos as #1…)

It’s a fascinating reversal. Uber has the highest valuation of any private company in Silicon Valley history and yet there is speculation from former fans that one of three things could devastate that valuation or even put Uber out of business: Google’s lawsuit, Amazon’s future threat, or Uber’s self-destructive culture itself. I’ve never seen anything like this. Nor have I seen a company that’s come under this much scrutiny still refuse to take any steps to change things.

It’s a story worth of the tech press fixating on: If Uber tanks, it’ll have big repercussions and the demons at Uber-- an unchecked cult of the founder, the dangers of sky high burn rates and runaway valuations, the increase in political tactics, spending and operatives taking over Silicon Valley, the staggering economic inequality of the “sharing economy,” and a bro-culture of outrageous sexism with no accountability-- are a grotesque extreme exaggeration of the same demons roiling the tech world generally.

Lately, the hypothetical cocktail party question in Silicon Valley has been if Uber destroys itself, and Lyft does get bought by GM, who winds up owning ride sharing in America until self-driving cars are a mainstream thing? Google, Apple, and Tesla are clear they want nothing to do with the whole labor mess that comes with drivers. (That’s my guess at why Google hasn’t bought Lyft yet to augment its ride sharing business. Note that the Waze one, only reimburses drivers for expenses, it is not designed to be anyone’s livelihood.)

I wouldn’t count DiDi Chuxing out, and I’m surprised more people aren’t saying this.

You remember DiDi? The company we all used to write about endlessly while it was competing with Uber? The company that Uber eventually capitulated to, despite about a year of insisting it was totally going to win in China. The first company to obliterate Uber using much of the same cash-heavy, friends-of-the-government playbook?

As a reminder, DiDi has long been the largest ride sharing company in the world by volume. Which isn’t a shock: Chinese cities add some 20 million people per year, the equivalent of two and a half New Yorks. The average speed of a car travels less than four miles per hour. And less than 20% of the 800 million urban Chinese own cars. DiDi doesn’t have to “replace” car ownership to achieve its valuation, like Uber has long hoped to in America. 80% of people in cities can’t get cars and can’t easily get around. And DiDi pretty much has a monopoly on that now. DiDi has also long claimed to be profitable in its largest markets.

As I wrote last week, DiDi may be the most likely of all the current decacorns to actually build a $100 billion “super unicorn” one day.

And remember, DiDi already has several powerful US ties. It’s an investor in Lyft, which you’d think is a fraught relationship given DiDi’s subsequent deal with Uber. But that Uber partnership hasn’t stopped DiDi from continuing to invest in other Uber rivals like Grab in South East Asia. Apple also invested $1 billion in DiDi, and Apple clearly has synergistic assets in payments, iPhones, and maps if DiDi wanted a partner to expand in the US with. One of DiDi’s largest investors is the very savvy late stage firm Coatue, based in Silicon Valley, which also invested in Lyft and Snapchat. And of course, DiDi has it’s strange joint venture with Uber, which it also invested in at the time of that deal.

In the last week, DiDi started to expand its physical presence in the Valley as well. It launched an R&D center in Mountain View, to focus on AI and other technology. It even poached talent from Uber to staff it.

DiDi is also cozying up to Udacity, the education startup built by Sebastian Thrun…. Once of Google’s self-driving car division. Thrun has warned how tight self-driving car talent is in the Valley, and Udacity is working on programs to address that. Last week, DiDi’s CTO Bob Zhang announced a self-driving car competition in partnership with Udacity.

These are small moves, but they are happening way earlier than most Chinese giants have historically turned their attention towards the American market. I’ve long assumed that one day DiDi and Grab will be part of the same company, and DiDi has strategic investments in Indian and Brazilian ridesharing companies. It’s far more likely to come close to the kind of “global domination” that Uber’s $70 billion valuation was based on.

But until recently, you had to assume the one market they wouldn’t compete in was America. That could change in another five years or so. If Uber and Lyft continue to bleed capital, struggle to find buyers, and don’t make the leap to self driving cars, you could easily see a scenario where DiDi (which will likely go public in the next year or so) snaps up those assets to compete here. After all, it’s already bizarrely an investor on both companies.

And that wouldn’t just be a remarkable twist on Uber’s plotline, it’d be a remarkable twist in Silicon Valley’s plotline. The first time a Chinese tech startup beat the Silicon Valley darling to win in America too.

We are still far off from that, and the US is still Uber and Lyft’s market to lose. But the Valley would do well to keep an eye on the much-forgotten DiDi Chuxing.